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Dropship

How Suppliers Can Adopt an Operations Framework to Support Drop Shipment

by Chuck Adams

In our last installment, we looked at the top challenges suppliers face as they look to expand their e-commerce market. Now, we are giving suppliers a step-by-step guide on setting up operations to support an enterprise dropship program.

Setting up the proper framework for dropship is a crucial part of growing your business. Most retailers use dropship as a mechanism to test what they sell online. Dropship will enable you to broaden your reach into more retailers and will enable you to offer a greater variety of goods.

Here are the steps you should take to establish your drop ship operations framework, in chronological order:

  1. Work Multiple Channels and Build Your IT Infrastructure

Gone are the days of solely selling to a major retailer. Retail suppliers must distribute their catalog via numerous avenues, including wholesale and direct-to-consumer channels.

There needs to be a commitment from both you and your retailer clients to intelligently ramp up a drop ship program. In the best situation, your retail partner will agree to test a number of SKUs when your collaboration starts, then work on fine-tuning and expanding dropship to a larger assortment. Once selling and shipping starts, you also want to ensure your IT infrastructure is set up to handle the volume and scale of business. If an order is going out, customers need to see where it’s headed in four to five hours. Supply chain visibility is crucial.

  1. Rethink How You Ship and Tailor The Customer Experience

Suppliers are still accustomed to bulk orders as a dominant revenue source. Shipping directly to consumers changes everything and adds the pressures of stringent requirements for timing and fill rates. When you ship directly to consumers there is no time buffer.

Accelerate your transition and accommodate the new model of fulfillment, particularly when you have more at stake to satisfy the customer. Retailers that you are working with – particularly giants like Amazon and Walmart – are tracking your performance. If a customer isn’t pleased with a transaction, you risk chargebacks or even loss of business with the retailer. Keep each customer informed and up-to-date, particularly if there are shipping problems or shortages. Retailers and customers need to know that an order is being fulfilled and shipped right away.

  1. Have the Right Service Level Agreement and Supply Chain Integration Solutions in Place

It takes time but suppliers need to customize the service level agreement with each retailer. The process isn’t perfect but there are tools and technologies that allow vendors and retailers to synchronize their service level agreements on a case-by-case basis.

As retailers standardize drop shipment, this process will become more uniform and offer complete visibility and compliance. Until then, closely communicate with your partners and get things right from the beginning by outlining your needs and understanding their expectations.

To expedite the process of achieving complete visibility and compliance, consider help from a third-party vendor to help automate the dropship process and provide visibility into inventory and supply chain exceptions. You can purchase and manage your own infrastructure, but enlisting experts to set up and run your dropship systems can minimize problems and facilitate growth, provided you conduct your due diligence on the vendor.

  1. Manage and Synchronize Inventory

This is as important for suppliers as it is for retailers. Sellers need to manage and then synchronize inventory with all their channel partners. You want to ensure consumers know which products are available. For example, if you haven’t updated your inventory, your retail partners may indicate an item is in stock when it’s not, leading to an order you can’t fulfill. This leads to a bad customer experience and the potential for lost business.

  1. Keep Your Safety Stock Safe

Inventory needs to be drop shipped from your master inventory – not from your safety stock. As you build your operations framework, remind yourself that a safety stock is only a buffer for emergencies.

If someone continues to use safety stock to fulfill orders, it means they aren’t managing overall inventory effectively. This leads to disappointed customers and downstream supply chain problems.

In the final article of this series, we’ll explore how sellers can implement sustainable and scalable dropship innovation.

Report: The State of Drop Ship Compliance

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